Futures hold losses as debt deal euphoria fizzles

Thursday, 17 Oct 2013 | 9:15 AM ETCNBC.com

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U.S. stock index futures declined Thursday, following recent sharp gains, on the heels of a deal agreement in Washington to reopen the government and raise the debt ceiling in order to avoid a debt default.

"The muted market reaction to the agreement reached by Congress likely in part reflects: i) that investors remained confident that a deal would ultimately be reached to avert default and as such it is no surprise, and ii) that the agreement is only a short-term solution," said Derek Halpenny, the ‎European head of market research at Bank of Tokyo-Mitsubishi, in a research note.

The deal will fund government agencies until January 15 and extend the government's ability to borrow until February 7. The Office of Management and Budget said that furloughed federal workers should report to work on Thursday morning, and Congressional leaders began to appoint budget negotiators to find a longer-term budget solution.

Treasury Secretary Jack Lew welcomed the action, but said the government faced further challenges to get the U.S. economy back on track.

"We remain committed to reaching agreement on a balanced fiscal package that will create jobs, grow our economy, and put us on a path toward long-term fiscal sustainability. Without question, it will require difficult choices," Lew said in a statement late Wednesday.

Analysts also warned that the deal merely delayed the need for government to make hard decisions.

"The good news for markets is that it seems highly unlikely that the Federal Reserve will risk tapering in December or January assuming the next budget negotiations go close to the wire again… it could be March at the earliest for tapering, which would continue to keep assets on the expensive side for the coming few months at least," said Deutsche Bank's Jim Reid in a note.

Earlier, Dallas Fed President Richard Fisher said the central bank cannot effectively combat high unemployment unless Congress and President Obama "get their act together" and fix the nation's fiscal problems.

"Kicking the can down the road for a few months will not solve the pathology of fiscal misfeasance that undermines our economy and threatens our future," Fisher said.

Chicago Fed President Charles Evans is scheduled to speak about the economy and monetary policy at 12:45 pm ET.

Fellow Dow component Verizon climbed after the telecom company reported better-than-expected quarterly results. The company added it expects wireless customer growth to improve sequentially in the fourth quarter.

On the economic front, weekly jobless claims fell 15,000 to a seasonally adjusted 358,000, according to the Labor Department. California continued to deal with a backlog related to computer problems. Economists polled by Reuters had expected first-time applications to rise to 335,000 last week.